T-Agitations a Big Dampener to Business Confidence in AP: Survey

Hyderabad, Aug 3 (INN): Majority of India Inc, surveyed by ASSOCHAM, perceives that the state of Andhra Pradesh may be in for a long haul of agitations and Bandhs on the knotty Telangana issue taking a toll on investment in the state, particularly in the new economy of the Hyderabad city.

As many as 67 per cent of the CEOs and senior managements of the corporates felt that the biggest casualty of the impasse on Telangana is investment in Hyderabad, particularly in the IT sector. While there is no threat of the existing companies shifting out of the city, fresh investment may not flow in as the boards of the multi-nations are receiving negative publicity about the disruptions, Bandhs in the state. The situation is likely to continue till 2014 elections taking a toll on the business environment not only in Hyderabad but other commercial hubs of the state such as Vijayawada, Kakinada and Visakhapatnam.

They also felt that the announcement made by the UPA to create Telangana with Hyderabad being the joint capital of Telangana and Andhra Pradesh would be difficult to sell across the state and more work was required in building a political consensus.

The Hyderabad region has been among the largest destinations of the foreign direct investment with cumulative FDI of USD 8.6 billion between 2000 and 2013. It has been among other favourite FDI destinations such Mumbai, Chennai, New Delhi and Bangalore.

The city witnessed increase in FDI even in 2012-13 to USD 1.16 from USD 848 million in the previous year. However, the trend may not continue till a clarity is available on the political situation in the state. In the last decade or so, ASSOCHAM says the character of the Hyderabad city has undergone a transformation to a cosmopolitan city with young IT professionals and from other disciplines drawn from all over the world. They provide a huge consumer base to the city, which traditionally was laid-back.

Over 91 per cent of the respondents in the ASSOCHAM survey agreed that it is the IT professionals who have given a cosmopolitan character to the city which has also thrown in a new breed of global entrepreneurs and business houses. Some of the home-grown entrepreneurs and groups from the city of Hyderabad and Andhra Pradesh have taken their footprints across the world. These include the GMR group, Dr Reddy’s Laboratories, Lanco, GVK group etc.

It was the political leadership in the early 2000s which pitched for making successfully Hyderabad as the modern city of India and successfully attracted a lot of global companies and investment with a liberal and friendly state government.

“While a liberal and friendly state regime continued in the recent past, unfortunately political events revolving around the demand for separate state of Telangana, have overwhelmed the political leadership. Besides, investors all over the world do not prefer a place which has rallies, bandhs and uncertainty of political structure,” said D S Rawat, Secretary General ASSOCHAM.

As many 81 per cent of the ASSOCHAM survey respondents said they do not see early solution to the issue. The backlash from the opponents will keep the political atmosphere in the state and the capital city of Hyderabad surcharged, vitiating business environment.

While the global IT investors will remain wary, those seeking opportunities in the state infrastructure like hotels, transport, ports are likely to be less enthused about Andhra Pradesh.

“Whenever a company decision about fresh investment in AP will go its board, the deliberations among the directors are bound to get focussed on the political situation and Telangana. Chances are investors might prefer the bordering states like Karnataka and Maharashtra,” the ASSOCHAM survey noted.

“It also apprehended that the situation was likely to become murkier in the run-up to the 2014 elections with investment being a casualty”, said Rawat.